Just one week ago, we had moved from Level 4 “lockdown” and were spending our first day in a new look Level 3. Now, one week later, we are highly anticipating an increasingly likely move to Level 2 this time next week. And so the question becomes, what will the real estate industry look like at Level 2?
I like to step back and reflect on our past economic crises when looking at our current pandemic, as it gives us a relative starting point for evaluation. During the 1990 recession and the Global Financial Crisis of 2008 – 2009, activity dropped by 25 – 40%. Comparatively, the Covid-19 impact has been much sharper and faster, and the full lockdown caused an almost 100% instant shut down. I believe this difference will also impact our recovery.
It is great how our country has dealt with this issue, both from the economic and health point of view. A decision was made very quickly to move to full lockdown, the government put subsidies in place to support business owners, and have now also offered up to $100,000 interest free loans for up to a year. This makes sense as there are nearly 500,000 small businesses in New Zealand, making up 97% of all business, so these small businesses will play an important role in getting the economy going again.
We knew right from the start that the longer lockdown and social distancing were in place, the harder the impact on the economy – and the real estate industry – would be. However, the end now looks to be a lot closer than what I thought it may have been 6 weeks ago. The number of new cases has been sitting at single digits now for over 2 weeks, and yesterday, for the first time in nearly 6 weeks, there were 0 new cases in New Zealand.
In a report I wrote a couple of weeks ago, I put forward two scenarios: 1. “The Positive Scenario”, where we would be back to ‘normal’ business as early as May; and 2. “The Negative Scenario”, where cases would rise, and longer restrictions would be in place. I strongly believe we are headed towards scenario 1, potentially already 80% of the way there. (If you missed it, you can read the full article HERE.)
Of course, we aren’t fully through this yet. In fact, it’s highly likely the number of cases will continue to fluctuate for some days – and weeks – to come. However, It looks like the speed in which we entered and moved up the levels, could be replicated in our move back to the lower levels once again. Imagine a “V” shape impact and recovery, compared to a “U” shaped slower recovery. This crisis is looking like a “V” – a sharp impact, with a quick recovery. Very low interest rates, and the removal of the Loan-to-Value Ration (LVR) will also help with the recovery of the real estate market in particular.
So what should you be doing if you are interested in buying or selling real estate? Last week I discussed the three categories you will fall in if you are thinking of transacting in real estate. One being, you are wanting to sell, but not buy straight away. I suggested, and still believe, that holding off for a few weeks at least if you can is the best option. Activity in the market has dropped considerably. Yes, buyers have started to come back this past week; however, people are still uncertain about the economy in general, and when there is uncertainty, human nature leads us to not make decisions; we hold back and wait.
But with the “V” shape recovery I have predicted, take the time now to get your property ready. Take beautiful photographs, and consider starting the process with a “soft-launch” marketing campaign. That way, as soon as the flood gates open, you will hit the market running. And that could well be later this month!
If you would like to chat to us further about what a “soft-launch” approach entails for you, if we can help in any way, or have any questions, please reach out to us. We will continue to keep you updated.
Take care,
Nathan Najib
You can see the full video interview HERE.